Should You Invest in the First Trust Natural Gas ETF (FCG)?

Designed to provide broad exposure to the Energy - Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) is a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Exploration is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $642.16 million, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the equity market. IEO seeks to match the performance of the Dow Jones U.S. Select Oil Exploration & Production Index before fees and expenses.

The Dow Jones U.S. Select Oil Exploration & Production Index is a free-float adjusted market capitalization-weighted index. The Index includes companies that are engaged in the exploration for and extraction, production, refining, and supply of oil and gas products.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.85%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 99.80% of the portfolio.

Looking at individual holdings, Conocophillips (COP) accounts for about 18.78% of total assets, followed by Eog Resources Inc (EOG) and Marathon Petroleum Corp (MPC).

The top 10 holdings account for about 69.42% of total assets under management.

Performance and Risk

The ETF has added roughly 7.23% so far this year and was up about 8.57% in the last one year (as of 11/12/2024). In that past 52-week period, it has traded between $87.76 and $111.94.

The ETF has a beta of 1.41 and standard deviation of 30.61% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IEO is a good option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Energy Exploration & Production ETF has $116.31 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.59 billion. PXE has an expense ratio of 0.60% and XOP charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

If you're interested in broad exposure to the Energy - Broad segment of the equity market, look no further than the Fidelity MSCI Energy Index ETF (FENY), a passively managed exchange traded fund launched on 10/21/2013.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $1.63 billion, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. FENY seeks to match the performance of the MSCI USA IMI Energy Index before fees and expenses.

The MSCI USA IMI Energy 25/50 Index represents the performance of the energy sector in the U.S. equity market.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 2.94%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 99.90% of the portfolio.

Looking at individual holdings, Exxon Mobil Corp Common Stock (XOM) accounts for about 22.92% of total assets, followed by Chevron Corp Common Stock Usd.75 (CVX) and Conocophillips Common Stock Usd.01 (COP).

The top 10 holdings account for about 64.04% of total assets under management.

Performance and Risk

The ETF has gained about 15.47% and is up about 16.54% so far this year and in the past one year (as of 11/12/2024), respectively. FENY has traded between $21.97 and $26.87 during this last 52-week period.

The ETF has a beta of 1.22 and standard deviation of 27.21% for the trailing three-year period, making it a high risk choice in the space. With about 112 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Energy Index ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FENY is an outstanding option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.21 billion in assets, Energy Select Sector SPDR ETF has $37.62 billion. VDE has an expense ratio of 0.10% and XLE charges 0.09%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

Occidental Petroleum Corporation OXY is expected to report an improvement in its top line and a decline in bottom lines when it reports third-quarter 2024 results on Nov. 12, after market close.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

The Zacks Consensus Estimate for OXY’s third-quarter revenues is pegged at $7.47 billion, indicating a nearly 1% increase from the year-ago reported figure.

The consensus estimate for earnings is pegged at 81 cents per share. The Zacks Consensus Estimate for OXY’s third-quarter earnings has decreased by 18.2% in the past 60 days. The estimate suggests a 31.36% year-over-year decline.